Hon'ble Devendra Kumar Arora,J.
Case called out.
Neither learned Counsel for the appellant is present nor there is any request for passing over or adjournment of the case.
This Income Tax Appeal under Section 260-A of the Income Tax Act, 1961 is at the instance of the Commissioner of Income Tax, Lucknow, questioning the order dated 30.12.2003 passed by the Income Tax Appellate Tribunal in I.T.A.No.891/Luc/2002.
The assessee-respondent, namely, St. Don Bosco Educational Society, Lucknow, is a Society registered under the Societies Registration Act, 1961 with an object to impart education to persons in India or any part thereof, irrespective of caste, creed, religion or community. The Society shall be solely for educational purposes and not for the purpose of profit. In furtherance of the aforesaid object, the Society has established educational institutions and has further moved an application for grant of exemption under Section 10 (22) of the Income-tax Act, 1961 [hereinafter referred to as the "Act"] which was processed and exemption was granted. On omission of the provisions of Section 10 (22) of the Act w.e.f. 1.4.1998, the Assessee Society moved an application for exemption under Section 10 (23) (c) (iii ad) of the Act for the Assessment Years 1998-99 to 2001-2002, which was accepted by the department. Subsequently, the receipts of the Assessee Society were increased to more than rupees one crore during the financial year 2001-2002 relevant to Assessment Year 2002-2003 and in view of the provisions of Section 12 (AA) of the Act, which was inserted by the Finance (No.2) Act, 1996 w.e.f. 1.4.1997, the Assessee Society moved an application under Section 12 (AA) of the Act for registration. The said application was considered by the Commissioner Income Tax-I, Lucknow and was rejected by the order dated 30.9.2002, inter alia on the grounds that the Institution is being run on commercial lines and the activities cannot be said to be for Charitable purposes within the meaning of Section 2 (15) of the Act.
Against the order dated 30.9.2002, the Assessee-respondent preferred an appeal, bearing I.T.A. No. 891/LUC/2002, before the Income Tax Appellate Tribunal. The Tribunal, after hearing the parties and perusing the records, allowed the appeal and directed the Commissioner Income Tax-I, Lucknow to grant registration by the order dated 30.12.2003 on the grounds that the Commissioner Income Tax-I had not doubted the objects and genuineness of the activities of the Assessee Society.
Feeling aggrieved by the order dated 30.12.2003, the appellant has preferred the instant appeal inter alia on the grounds that Section 12 AA of the Act empowered the Commissioner Income Tax to examine the genuineness of activities of the Trust and also examine as to whether the Society is a charitable institution and its activities are within the purview of Section 2 (15) of the Act or not but the Tribunal has not understood the scheme of the Act into its perspective insofar as there are clear findings in the order of Commissioner of Income Tax that activities during preceding three years are embedded with profit motive and are, therefore, not charitable.
While entertaining the instant appeal, this Court, vide order dated 5.7.2004, admitted the appeal on the following substantial questions of law :
"1. Whether under the facts and in the circumstances of the case Income Tax Appellate Tribunal was justified in holding that assessee society is entitled to get registration u/s 12AA of the Income Tax Act, 1961 ?;
2. Whether under the facts and in the circumstances of the case Income Tax Appellate Tribunal was justified in holding that scope of powers of Commissioner of Income Tax u/s 12AA is confined to examine the genuineness of the activities of the Trust or Institution and once Commissioner of Income Tax has not doubted genuineness of the activities nor doubted the objects of the Society, his power ends and he cannot be allowed to travel beyond and to enter into the scope to find out as to whether the assessee Society is a charitable institution or whether is carrying activities which are covered u/s 2 (15) of the Income Tax Act, 1961 ?;
3. Whether under the facts and the circumstances of the case, Income Tax Appellate Tribunal was justified in inferring that for the purposes of examining the genuineness of the activities within the meaning of section 12AA of the I.T.Act, Commissioner of Income Tax cannot examine as to whether the Society is a charitable institution or whether its actual activities are covered u/s 2 (15) of the Income Tax Act, 1961?; and
4. Whether under the facts and circumstances of the case Income Tax Appellate Tribunal was justified in holding that Society should be held as a charitable society at present and should be allowed registration because upto A.Y. 2001-2002 as its claim was found covered under section 10(22)/10(23)(c) of the Income Tax Act, 1961 and it was found to be working not for profit which is contrary to the findings of Commissioner of Income Tax in Para 5.3 of his order that Society is being run on commercial lines for the financial years 1998-99, 99-2000 & 2000-01 ?"
In order to answer the question raised in the instant appeal, it would be appropriate to deal with the provisions of Section 12AA of the Income Tax Act, which reads as under:
"12AA. Procedure for registration:
(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall--
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he--
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant.
(2) ......
(3) Where a trust or an institution has been granted registration under clause(b) of sub-section(1) or has obtained registration at any time under section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996(33 of 1996)) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution".
As per Section 12AA of the Act, an application for registration of the Trust and Institution is required to be made within one year from the date of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub-section (3) of Section 12AA of the Act, empowers the Commissioner to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the Trust or Institution.
Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act.
On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects.
Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return.
In the instant case, the Income Tax Appellate Tribunal, found that the Commissioner of Income Tax/Director of Exemption is empowered to satisfy himself about the objects of the Trust or genuineness of the activities of the Trust or Institution, before granting the registration under Section 12A of the Act. The power of the Commissioner of Income Tax under Section 12AA of the Act, does not extend to examining the other conditions of exemption of income under Sections 11 and 12 of the Act, which are to be seen in the assessment proceedings. The application for registration of the Trust/Institution has to be made within a period of one year from the date of creation of the Trust, but there is no requirement that the Trust or the Institution should have started all its envisaged activities in the first year itself. The quantum of activities undertaken by the Trust after its creation, cannot be the basis for examining registration application under Section 12AA of the Act. Furthermore, the Tribunal observed that mere charging of high fees is also no ground unless specific finding is recorded that Assessee Society was earning profit and no such finding is on record. On such basis, the Tribunal came to the conclusion that Assessee Society is entitled to get registration under Section 12 AA of the Act as the Commissioner, Income-tax-I had not doubted on the objects and genuineness of the activities of the Assessee Society. In these backgrounds, the Tribunal allowed the appeal and ordered granting of registration to the Society.
In that view of the matter, we find no reason to interfere with the order of the Tribunal and accordingly, all the questions require no further consideration. The Income tax appeal is dismissed as devoid of merits.
Order Date :- 11.4.2012 Ajit/-